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Algerian President Warns of Tough Times to Come

During his speech to Algerians on Independence Day, President Abdelaziz Bouteflika warned the country’s citizens of tough times to come. The president urged the Algerian people to prepare for the pinch of economic reality as the state will cut vital subsidies and increase taxes as its oil coffers dwindle.

In his speech Bouteflika blamed the country’s current economic crisis on external factors triggering a “severe decrease” of revenues and necessitating “reforms” that should “be accepted by citizens.” The government has been warned by many economists and experts over the past 18 years that it would need to diversify its economy away from its reliance on crude revenues.

The government’s appropriations bill for 2017 has been calculated on an oil price of US$50 per barrel, while the IMF estimates that Algeria needs a barrel price of US$110 to maintain macro-economic balance. Economic analysts warn of an upcoming budget crisis if oil prices remain at the current levels.

Bouteflika and his regime have embarked upon a number of projects that are deemed by some as a waste of government funds, while others have fallen to the wayside under the weight of corruption. Projects like the East-West Highway, which originally allocated a budget of US$6 billion have been so plagued by graft that the price tag as more than doubled to US$15 billion, making it mile for mile the most expensive road in the world. Then there is the squandering of resources on pie in the sky items like the Bouteflika mosque, which has a US$1.4 billion price tag. The mosque, which will have a capacity for 250,000 worshippers and will host the tallest minaret in the world, has diverted funds away from the much needed health care and social services sectors.

While the country did not experience the Arab Spring that its neighbors did, the austerity program, continued unemployed youth, languishing oil prices, regional turmoil and latent militant groups could bring serious social consequences to Algeria.